Nigeria’s $500 million of Eurobonds rose for a third day, sending yields to a record low as the outlook for economic growth boosts demand for the nation’s debt.
Borrowing costs on dollar debt due 2021 declined seven basis points to 4.68 percent at 3 p.m. in London, the lowest since their issue in January 2011, according to data compiled by Bloomberg. Yields on the international bonds of Africa’s biggest oil producer have declined 147 basis points, or 1.47 percentage points, this year.
Sub-Saharan Africa’s second-biggest economy is set to expand 6.5 percent in 2013, President Goodluck Jonathan said Oct. 10. That compares with growth of 2.1 percent for the U.S. and 0.9 percent for Germany where yields on 10-year bonds are less than 2 percent, according to International Monetary Fund forecast and data compiled by Bloomberg.
“The likelihood of a prolonged period of weakness in the developed world will continue to push large amounts of capital to the emerging world - including sub-Saharan Africa - where growth is expected to hold up relatively well,” Shilan Shah and Neil Shearing, London-based economists at Capital Economics Ltd., wrote in a report today. “As African economies continue to develop, their appeal to bond investors will only grow.”
Nigeria plans to sell $1 billion of international bonds next year to fund gas pipelines and other infrastructure, Jonathan said earlier this week.
Nigeria’s benchmark Bonny Light crude has risen 27 percent from its June low this year. The West African nation’s foreign-reserves have increased 27 percent to $41.7 billion this year, according to data compiled by the Abuja-based Central Bank of Nigeria as of Oct. 10.
The naira fell 0.2 percent to 157.38 a dollar in Lagos, the commercial capital. The currency has gained 3.1 percent this year, the second-best performer in Africa, according to data compiled by Bloomberg.
Yields on the nation’s 16.39 percent bonds due 2022 fell eight basis points to 13.67 percent, according to yesterday’s prices on the Financial Markets Dealers Association website.
The government’s most-traded bonds maturing in March 2014, October 2019 and January 2022 will be added to JPMorgan Chase & Co.’s GBI-EM indexes between Oct. 1 and Dec. 3, the bank wrote in a note to clients Sept. 25.
Local currency bond purchases “appear to include new entrants to the market who have been alerted to Nigeria on their radar screen following its inclusion in the JPMorgan government bond index,” Gregory Kronsten, head of economic research at FBN Capital Ltd. in London, wrote in an e-mailed note to clients today.
Ghana’s cedi rose less than 0.1 percent to 1.8935 a dollar in Accra, the capital.